Brown finally admits that there will be cuts in public spending

Gordon Brown changed his tune on public spending last night, admitting Labour would have to cut Government programmes, as he tried to refocus his attack on the Conservatives.

The Prime Minister insisted that Labour would secure economic growth, efficiency savings, asset sales and public-sector reforms to protect frontline services which would be at risk under a Tory Government. But he said it would be "fine" for other programmes to be "cut" and that Labour would face "hard choices".

"I want to get the resources to the frontline – to the police, the hospitals and schools," he said.

Rejecting David Cameron's repeated claims that he was being "deceitful and dishonest" about the need for lower spending, Mr Brown insisted: "I have always told the truth, I have always told people as it is. I have explained we have a deficit reduction plan for the future. But you cannot do that without growth and employment in your economy."

He told the BBC: "The honest thing to do is to say we have to get back to growth and jobs. The dishonest thing is to say this will happen without taking any action at all."

His new language followed pressure from Cabinet ministers, including the Chancellor, Alistair Darling, for a more realistic approach amid fears that Mr Brown's "Tory cuts" message was cutting little ice with voters, who knew cuts were needed to fill the black hole in the public finances, whoever was to win the general election. As The Independent revealed yesterday, the Cabinet has agreed to acknowledge the need for savings in the hope it can turn public spending into a vote-winner for Labour.

But ministers were privately aghast that Mr Brown did not reflect the new approach when public spending dominated Prime Minister's Questions for a third session running. He was again accused of issuing misleading figures.

The Tories claimed the Prime Minister was "in denial" after he disputed a confidential Treasury paper, leaked to the Tories and brandished by David Cameron. The paper admitted that there would be a "reduction in medium-term spending" overall when building projects and day-to-day running costs were added together.

Mr Brown made a gaffe by speaking of a "zero per cent rise" in total spending. He later admitted his mistake, saying he was referring to a 0.7 per cent average rise in real terms in current spending in future years.

Mr Cameron told him: "Today we see a Prime Minister in full retreat. In the first answer, he says that we are going to get a zero per cent. increase in public spending – that is a new one. In the second answer, he finally admits that he is going to cut, and cut deeply, capital spending. He talks about the debate about public spending; the debate is about whether the Prime Minister can be straight with the British public."

The Tories also attacked Mr Brown's statement that it was the wrong time to hold a government-wide spending review "in the midst of a recession". They accused him of hiding the need for "Labour cuts".

Nick Clegg, the Liberal Democrat leader, accused both main parties of conducting a "bogus debate" about spending. He accused the Prime Minister of "living in complete denial" about the long-term savings needed to balance the nation's books and claimed Mr Cameron wanted to cut spending now, which would be "economic madness".

The public spending watchdog warned that the NHS and education could not be immune from spending cuts because they were "inefficient".

Steve Bundred, the chief executive of the Audit Commission, told a fringe meeting at a Local Government Association conference: "Both political parties have pledged that whatever happens they will protect health and education... that's a big mistake. Health and education are the two services that have been most generously funded over the past decade but they are among the most inefficient services."

As the battle over spending intensified, Lord Mandelson re-ignited his feud with George Osborne, the shadow Chancellor, by accusing him of lying.

The Business Secretary claimed Mr Osborne had told a "deliberate untruth" by alleging that the Opposition was being denied access to government figures on public spending. He said the allegation had been flatly rejected by the Cabinet Secretary, Sir Gus O'Donnell. "There is a very unattractive pattern of behaviour that is starting to emerge with George Osborne, of innuendo in pursuit of a smear," he said.

Mr Osborne stuck to his guns, insisting the Tories had been denied the chance to inspect a database detailing public expenditure in 12,000 key areas. He said they had requested sight of the Combined Online Information System at two meetings but were rejected.

Downing Street said Mr Brown was unaware of these requests. The Tories challenged Lord Mandelson's claim that decisions on releasing information to opposition parties was a matter for civil servants rather than ministers. They cited a letter from Mr Brown to Mr Cameron last December saying that requests for information "should be dealt with at ministerial level".

Lord Mandelson clashed with Mr Osborne last Summer after they both spent time on the yacht of the Russian oligarch Oleg Deripaski in Corfu.